Capitalist Monopolies

Monopolies, Capitalist

 

large economic associations, such as cartels, syndicates, trusts, or concerns, which are owned by individuals, groups, or shareholders and which control industries, markets, or entire economies through a high concentration of capital and production with the aim of establishing monopoly prices and making monopoly profits. Their domination of the economy is the basis for their influence on all spheres of life in capitalist countries.

Historically, the formation and growth of monopolies are indissolubly linked with the transition from capitalism based on free competition to monopoly capitalism. A thorough theoretical analysis of the role of capitalist monopolies in the rise and development of imperialism is given in Lenin’s classic work Imperialism, the Highest Stage of Capitalism. In capitalist economic relations the growth of monopolies led to the strengthening of their power to dictate and dominate. “Monopoly is the exact opposite of free competition” (V. I. Lenin, Poln. sobr. soch., 5th ed., vol. 27, p. 385). Because of the high concentration of economic resources at their disposal, capitalist monopolies have the potential to accelerate technological progress. However, this potential is realized only when the acceleration promotes the making of high monopoly profits. Monopolies can also retard technical progress if it threatens profits.

The history of capitalist monopolies is inseparably bound up with the development of processes which, at each stage, increased the rate of monopolization in the economy or engendered new forms of monopoly. Among the most important of these processes are the growth of joint-stock property, the new role of banks and the development of the “holding system” through the monopolistic centralization of capital mergers, the evolution of forms of monopoly associations, and the appearance of new forms of association. Each of these processes has an independent significance in the development of modern capitalism, and, at the same time, each of them in its own way has accelerated monopolization.

The methods of concentration and centralization of capital used in the 19th century did not ensure sufficient pooling of capital for efficient mass production. Industrial concentration and the building of giant new factories and plants required an expansion that would overcome the limits set by the old forms of capitalist property. The methods for such rapid expansion of capitalist ownership under central control had long existed (primarily the joint-stock organization of the capitalist company), but only with the rapid growth of productive forces did they come into wide use and acquire decisive significance.

An important aspect of the development of capitalist monopolies is the new role of banks and other financial institutions and the holding system. The growing concentration of capital and production reinforced the need to expand the role of banks and compelled industrial companies to seek strong ties with banks in order to obtain long-term loans and to ensure credit in the event of changes in the economic situation. From modest intermediaries banks developed into powerful monopolies. This meant that formally there was “a distribution of the means of production on a social scale.” In substance, however, the distribution was private, that is, it conformed to the interests of monopoly capital (ibid., pp. 326, 333). The merging of banking and industrial capital led to the formation of finance capital and to the rise of the financial oligarchy.

An important means for creating monopoly associations within and among industrial sectors was the holding system. The potential for the development of this system was inherent in the joint-stock organization of capitalist companies. A joint-stock company is controlled by the owner of the controlling block of shares. If the owner of the controlling block is another company, it thus acquires the power to direct its subsidiary. This is the holding system, which may be multitiered, ensuring the company at the top of the pyramid control over vast amounts of capital.

The rapid increase in the amount of capital was also assured by greater centralization through the merger of independent companies, a form of capital centralization widely used in the USA. In the USA the first great wave of monopoly mergers occurred in the 1890’s and early 20th century, when giant companies bringing entire industries under their control were formed, such as United States Steel in metallurgy, Standard Oil in the petroleum industry, and General Motors in the auto industry. The second great wave of monopoly mergers in the USA came on the eve of the 1929–33 depression, when monopolies were formed in the aluminum, glass, and other industries. Other forms of monopolization developed in the European capitalist countries, notably, syndicates and cartels, which Lenin called monopolistic associations. Cartels were also created internationally as a form of international monopoly.

Capitalist associations originally based on the holding system were called trusts or concerns. They were headed by holding companies—either financial institutions, such as banks and investment firms, or large industrial or commercial corporations. Originally the difference between a trust and a concern was regarded as either purely terminological (the term “trust” being more commonly used in the USA and the term “concern” in Europe) or as a difference in the scope of the enterprises belonging to the association. Whereas a trust generally included enterprises in one industry, for example, the American Standard Oil and United States Steel corporations, a concern encompassed enterprises from different industries. However, with greater concentration, the differences between trusts and concerns increased. Trusts tended to develop stronger production links between their enterprises. Simultaneously, vertical concentration occurred within the trusts as consecutive links in the economic chain were joined. In the concerns capitalist concentration took the form of integration of production processes. The development of capitalist combines led simultaneously to an increase in vertical and horizontal concentration. The integration of production within a single complex received further impetus in 1920–30, when a number of new, chiefly chemical, industries were developing for processing such primary raw materials as petroleum, coal, and wood.

The development of concerns was determined by the processes of integration and the need for closer cooperation among different industries, which required more centralized control. It was not accidental that after World War II many American corporations transformed their former subsidiaries into new divisions, replacing the holding system with direct centralized control.

After World War II new forms of monopoly association arose, the conglomerates, which became particularly widespread in the USA. The conglomerates brought together the most diverse industries, having no production connection and not even linked by common raw material or marketing conditions. The formation of conglomerates resulted from the increased concentration in the mid-20th century of scientific research and management. In the conglomerates, capital can flow from one branch to another, bypassing the traditional capital market.

The development of all types of monopoly concentration inevitably leads to the accumulation of an ever larger part of the national income and national wealth of the capitalist countries in the hands of a small number of giant monopolies. Table 1 shows the proportion of capital assets held by the largest US manufacturing corporations out of the total assets in the manufacturing sector between 1948 and 1969.

Table 1. Percent of total manufacturing assets held by major US corporations
Number of corporations19481955196019651969
100 . . . . . . . . . . . . . . .40.344.346.446.548.5
200 . . . . . . . . . . . . . . .48.353.156.356.760.1

Available statistics point to an intensification of monopoly concentration in Great Britain. The proportion of capital assets controlled by 100 of the largest firms in manufacturing, trade, and services rose from 44 percent of the total assets in 1953 to 62 percent in 1963, according to the data of the National Institute of Economic and Social Research.

The development of capitalist monopolies has significantly sharpened the contradiction between the tendency toward planning within large industrial associations and the anarchy of the capitalist economy as a whole. As monopolies grow, this contradiction intensifies, giving rise to new ways of regulating the economy, such as monopoly associations of different industries and state regulation and planning. Under capitalism, however, the contradiction can never be resolved. Thus monopolization of the economy creates not only the material base—the productive forces—for the transition from capitalism to a higher form of organization of social production, but also the formal apparatus for the transition. But on this point the Leninist theory of imperialism diverges from the theories of “organized capitalism,” and the “modern industrial society.” In his day Lenin strongly criticized K. Kautsky, who asserted that the development of monopoly associations would lead to the formation of a worldwide capitalist trust, to “ultraimperialism.” Kautsky transformed the tendency toward organization and planning in large-scale production into an absolute. Unlike Kautsky, Lenin showed that the tendency toward planning and toward the overall organization of production is irreconcilable with the very foundations of capitalism, a spontaneous economic system.

Among the bourgeois economic theories that have evaluated the results of monopolization of the economy the best known is the theory of “effective” competition expounded by the American economists J. M. Clark, J. Bain, and E. Mason. The essence of the theoretical research and practical proposals of these scholars is that the size of capitalist associations should be limited but without impairing their economic efficiency. In this way, supposedly, competition in the market is assured without sacrificing economic efficiency, which requires a certain degree of industrial concentration. However, the enormous and growing concentration of production and capital destroys the hopes of these theoreticians for limiting monopolies through government regulation. Another trend in the study of monopolies, represented by such American economists as J. K. Galbraith, J. Schumpeter, and G. Means, has always recognized the impossibility of limiting the growth of monopoly domination over the market. They place their hopes on an increased sense of “social responsibility” on the part of the directors of monopoly associations and on the possibility of influencing them, thereby regulating monopolies, so to speak, from within. The theories of this school have clearly reformist overtones, especially Galbraith’s theory of the “new industrial state.” The growth of monopolies has resulted not in the harmonizing of contradictions or the creation of a worldwide capitalist trust, but in the sharpening of contradictions and increasingly uneven development.

REFERENCES

Marx, K. Kapital, vol. 1. In K. Marx and F. Engels, Sock, 2nd ed., vol. 23.
Lenin, V. I. Imperializm, kak vysshaia stadiia kapitalizma. In Poln. sobr. soch., 5th ed., vol. 27.
Politicheskaia ekonomiia sovremennogo monopolisticheskogo kapitalizma, vol. 1. Moscow, 1970. Chapters 5–7.
IU. B. KOCHEVRIN
Russia. The first Russian capitalist monopolies, the Association of Rail Manufacturers and the Association of Rail Factories, were formed in the 1880’s. A unique feature in the development of capitalist monopolies in Russia was the direct intervention of government agencies in the creation and operation of monopolies in industries providing necessities for the state economy and playing a leading part in the state economy, for example, metallurgy, transport, machine building, and the petroleum and sugar industries. State-monopoly trends thus appeared early. In the 1880’s and 1890’s there were 50 different associations and agreements in industry and water transport, and monopoly concentration was also under way in banking. Foreign capital accelerated the process of monopolization.
Prior to the early 20th century the capitalist monopolies did not play a large role in the economy, but the economic crisis of 1900–03 decisively affected their development. Monopolies gradually took over the most important industries. For the most part they were cartels and syndicates with a monopoly on sales; the participating companies retained financial and production independence. Trusts also emerged, for example, the Nobel Brothers Company and the Thread Trust. The absence of legislative and administrative norms for regulating the formation and operation of monopolies made it possible for the government to use against them legislation formally prohibiting monopoly activity. This led to a proliferation of officially unregistered monopolies, some of which operated, however, with the consent and direct support of the government, for example, Prodparovoz (locomotives) and armaments monopolies. Their “illegal” position was inconvenient for it limited their commercial and legal activity, and they sought to gain legal status by making use of the forms of industrial association that were permitted. Many large syndicates—for example, Pradamef (iron, steel, and rolled metal), Produgol’ (coal), Prodvagon (railway car), Krovlia (roofing), Med’ (copper), Provolka (wire), and ROST (Russian Match Company)—were formally joint-stock enterprises whose real aims and activities were governed by secret contracts. Often the same companies were parties to several different agreements. During the industrial expansion from 1910 to 1914 there was a further growth of capitalist monopolies, and the number of commercial and industrial cartels and syndicates reached 150–200, including several dozen in transportation. Many of the largest banks developed into banking monopolies. The investment of banks in industry, as well as the concentration and integration of production, promoted the consolidation and development of such trusts and concerns as the Russian General Petroleum Corporation, Kolomna-Sormovo (locomotives), TreugoPnik (rubber), Russud-Naval’ (seagoing vessels), and the military-industrial group of the Russo-Asiatic Bank. The degree of concentration in marketing and production was uneven. In such branches of the economy as metallurgy, transport machine building, petroleum and coal mining, and sugar production, monopolies controlled the bulk of production and marketing and held virtually unlimited sway over the market. In other industries, such as metalworking, food processing, and light industry, there was little monopolization.
During World War I a number of local monopolies disintegrated, but on the whole the war increased the number and power of the monopolies. Enormous concerns arose, such as those owned by Vtorov, Putilov-Stakheev, Batolin, and the Riabushinsky brothers. Monopolies associated with war industries grew especially rapidly. Russian monopoly capitalism developed through an interlocking of monopolies and government agencies (for example, the Metallurgical Committee and the Jute Syndicate) and as “compulsory” associations established at the government’s initiative and with its participation, such as the Vankov and Ipat’ev organizations and the Kiev organization for the production of barbed wire. Capitalist monopolies were abolished during the October Revolution, with the nationalization of industries and banks in 1917–18. The Soviet state used some of the accounting and distribution apparatus of the monopolies in creating its own economic agencies.

REFERENCES

Lenin, V. I. Imperializm, kak vysshaia stadiia kapitalizma. In Poln. sobr. soch., 5th ed., vol. 27.
Lenin, V. I. “Groziashchaia katastrofa i kak s nei borot’sia.” Ibid., vol. 34.
Tsyperovich, G. Sindikaty i tresty v dorevoliutsionnoi Rossii i v SSSR. Leningrad, 1927.
Granovskii, E. Monopolisticheskii kapitalizm v Rossii. [Leningrad] 1929.
Tarnovskii, K. N. Formirovanie gosudarstvenno-monopolisticheskogo kapitalizma v Rossii v gody pervoi mirovoi voiny (Na primere metallurgicheskoi promyshlennosti). Moscow, 1958.
Monopolii i inostrannyi kapital v Rossii. Moscow-Leningrad, 1962.
Livshin, la. I. Monopolii v ekonomike Rossii. Moscow, 1961.
Ob osobennostiakh imperializma v Rossii. Moscow, 1963. (Collection of articles.)
Laverychev, V. la. Monopolisticheskii kapital v tekstiVnoi promyshlennosti (1900–1917 gg.). Moscow, 1963.
Bovykin, V. I. Zarozhdenie finansovogo kapitala v Rossii. Moscow, 1967.
Kitanina, T. M. Voenno-infliatsionnye kontserny v Rossii 1914–1917 gg. Leningrad, 1969.
T. D. KRUPINA
References in periodicals archive ?
There was organic integration of the wealthy bourgeoisie with foreign capitalist monopolies.